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4 Things to Know When Buying a Rental Home

Rental home

Rental homeThe benefits of owning rental properties are numerous, including passive income, stable cash flow, tax advantages, and more. The challenge is to find the right property that can generate positive return on investment (ROI). If you are just getting started, consider the following tips to help you make a smart purchase.

Do Due Diligence

Take your time to research the property inside and out. This means having the home inspected, speaking to your mortgage planner and insurer, looking into the ownership history, understanding market trends, and assessing neighborhood-specific statistics.

Be sure to come up with a plan of action that outlines your long-term goals, target clientele, and financial situation. When formulating goals, follow the time-proven S.M.A.R.T. model, which stands for goals that are Specific, Measurable, Attainable, Realistic, and have a Timeframe.

Reduce Debt

While having debts is not an impediment in and of itself, lenders will typically look at your debt-to-income ratio when considering whether you are eligible to borrow. Review your financial situation to determine if this is the best time to invest in a rental home. Remember that when purchasing a second home you should always have enough funds for unexpected expenses in addition to a down payment and your monthly mortgage.

Be Ready to Fulfill Obligations

Being a landlord has its pros and cons. Ask yourself if you are up to the task and have the time and resources to efficiently deal with tenants. Just as the tenant must take good care of the property, the landlord has also a set of obligations toward tenants, such as providing a safe and habitable living space. This means adhering to all building codes, performing necessary repairs, maintaining common areas, and keeping utilities in working order.

Find the Right Location

It may sound like a no-brainer, but location is one of the most important factors when purchasing a rental home. You can change almost anything within the home, but once bought you can’t change the location. When researching a neighborhood and surrounding areas, factor in amenities and nearby recreation options, crime rates, school district, proximity to public transport, and walkability to shopping, dining, and entertainment areas.

Are you interested in learning more about real estate investing? RLG would love to help you find a suitable investment strategy for your goals! Call us today to learn more!

About the author 

Ridge Lending Group

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